This question has been coming up a lot lately in the media and some academic journals. Thinking Modern Portfolio Theory died last year is based on the misconception that Modern Portfolio Theory will guarantee against a loss.
That is simply not the case. What MPT believes is diversification to a portfolio, which over the long term can potentially reduce a portfolio’s volatility versus a single asset portfolio.
According to a recent article in Investment News:
- MPT does not guarantee against a loss
- Fixed income helped reduce the amount of loss in many portfolios last year
- Many advisors are finding that their clients had too much equities and not enough fixed income for their risk tolerance
Remember, when investing in a diversified portfolio, you will experience negative returns periodically.
If you enjoyed this post, please consider leaving a comment or subscribing to the feed to have future articles delivered to your feed reader.
Related posts:
- Ten Stock Investments for the Next Decade With the dawn of a new decade arrives the financial...
- Can Active Investment Managers Consistently Beat the Market? Proponents of active investment management believe that skilled managers can...
- The Resilient Investor: Predicting the Economy One outcome of the financial crisis is we have to...
subscribe to the 
Follow us on 
Follow us on